Can a party be forced to arbitrate,
where it did not sign the agreement requiring arbitration? The
United States District Court for the District of Colorado recently
decided yes, at least under some circumstances. In Todd
Habermann Construction, Inc. v. Epstein, 70 F. Supp.
2d 1170 (D. Colo. 1999), the Court compelled an owner to arbitrate
pursuant to the arbitration provision contained in AIA Document A201,
General Conditions, even though neither the owner nor the contractor
signed the underlying AIA form agreement. Holland & Hart
LLP represented the contractor in the case.
Although it may sound somewhat novel to enforce an arbitration
provision where the party resisting arbitration did not sign
the agreement, the result is hardly surprising or even novel
under the facts involved in Habermann. Despite the
lack of a signed agreement, the Court held that an agreement
to arbitrate was formed. Specifically, the owner solicited
bids from Todd Habermann Construction, Inc. (“THC”). The “solicitation
required that the bid be made on the basis of certain general
conditions (including an arbitration provision) and that the
contractor whose bid was accepted agreed to enter into an AIA
contract (which also included an arbitration provision).” Id.
at 1173.
THC submitted a bid based on those requirements, and the owner
orally accepted the bid. Id. Once the bid was accepted,
even though the acceptance was oral, the Court held that a contract
was created. Id. at 1174. Perhaps significantly,
the Court noted that THC began working on the owner’s project
based on the owner’s acceptance of the bid (that acceptance came
through the owner’s architect, who the Court found to be authorized
to solicit the bid and communicate the acceptance of the same). Id.
It was undisputed that a written contract was never signed. There
was, however, evidence that the owner, prodded by the contractor,
gave repeated assurances that he would sign the contract.
The Court concluded that the course of conduct of the parties
established an agreement on the terms of an AIA contract, including
the arbitration provision. The Court held that neither
the Uniform Arbitration Act nor the Federal Arbitration Act require
that the arbitration agreement be signed. “While both acts
require that the terms of an arbitration agreement be in writing,
neither requires that the agreement be signed by either party.” Id.
Thus, the Court “concluded the written arbitration agreement
is enforceable notwithstanding that it was not signed by either
party.”
Why did the Court enforce the arbitration agreement, despite
the fact that neither party signed the agreement? The answer
lies in the parties’ conduct:
• By soliciting a bid based on an AIA form
which included an arbitration provision, the owner indicated
in advance that it assented to arbitration.
• That assent was reinforced when the owner accepted
the bid, which indeed was based on the AIA form.
• The owner permitted work to proceed in the
absence of a written agreement. This course of conduct
essentially became a substitute for a signed agreement, the
terms of which already had been spelled out in the bid request,
bid, and bid acceptance.
• There was evidence of repeated assurances by
the owner that he would sign the contract. Again, this
conduct, which induced the contractor to continue work in
the absence of a signed agreement, essentially took the place
of a signature on the agreement.
The lessons of the case are multiple. First, parties ought
not to assume, simply because they have not signed an agreement,
that an agreement has not been formed. Second, where the
terms of an agreement have been discussed, but no agreement has
yet been signed, any party wishing to avoid being bound by an
agreement should not perform work or, in the case of the owner,
permit work to be performed prior to execution of the written
agreement. Third, a party giving assurances that an agreement
will be signed may be held to those assurances (this is the essence
of the legal doctrine of estoppel).
Kevin Bridston is
a partner in Holland & Hart LLP's Construction and Real
Estate Litigation Group. |
